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Guide to Credit Reports

What is a credit report?

Credit reports contain a history of your credit and debt usage. They are used to generate credit scores and are often requested by banks and other lending agencies. Just like your resume shows prospective employers what a good or bad employee you are, a credit report paints a picture of how reliable you are when it comes to paying off your debts and managing your finances.

Equifax, TransUnion, and Experian are the three credit bureaus that create and maintain credit reports. When a lending agency is deciding whether they can extend a line of credit to a potential borrower, they go to one of the three bureaus to buy a credit report. Each of “the big three” maintains their own reports and uses their own score algorithms, so you might have a different report or score depending on what information the bureaus have obtained.

What is in a credit report?

Personal information like your name, social security number, date of birth, and employment information may be on your report as a way to identify who you are. They don’t affect your credit score. Your personal information is updated every time you give information to a lender.

Trade Lines – All of your credit accounts will be listed on your report. The type of account (e.g. a mortgage, a car loan, a school debt, or a bank card) are listed with pertinent information:

The date the account was opened

Credit limit or amount of the loan

Account balance

Your payment history for each account

Credit Inquiries – When you apply for a loan, you give permission to your potential lender to ask for a copy of your credit report. This is known as an inquiry. A credit report lists every inquiry from the past two years. Inquiries fall into two categories:

Voluntary inquiries – Ones that you make yourself or authorize others to do

Involuntary inquiries – When lenders do things like look at your report to send you approved offers via mail or email

Public Records and Collections – If you have unpaid debts from a collection agency, file for bankruptcy, or foreclosure, or something similar, this will show up on your credit report. Wage attachments, liens, and judgments are also counted under public records.

Why should I care about my credit report?

It’s not just banks and businesses that care about credit reports. You should care about them too! Mistakes on your credit report may happen -there are millions of reports to maintain, and it’s not inconceivable that mistakes get made on a few. It’s your responsibility to make sure your report is accurate.

Many experts recommend that you order a copy of your credit report once a year and review it thoroughly for accuracy. If any mistakes have been made, you can report them to a credit bureau and to the originating creditor so that they can be corrected.

Otherwise, you might be left high and dry when you need to apply for a loan. Some employers also look at your credit report when making their hiring decisions. You may be alerted to identity theft via your credit report as well.

All credit reporting agencies are required by the Fair Credit Reporting Act (FCRA) to give you access to a free credit report. You can go to annualcreditreport.com to order a free report. Since you have several reports and scores you should check with each of “the big three” when reviewing your report.

When looking for errors keep an eye out for:

Misspelled names

Credit accounts that you never opened

Collections that have not been updated or left open despite being resolved

While credit reporting companies are required to give you a free report, they aren’t required to give you the actual credit score for free.